Poker and Effectual Thinking

Poker and Effectual Thinking
by Wade Armstrong

One of the best parts of business school is the guest speakers; the most recent to drop in was World Poker Tour founder Steve Lipscomb. Steve, first of all, was a rollicking, fun speaker; better than that, he told a great story about how he got to where he is today (that is, founder of a $100 million public company that, um, televises poker tournaments). His story illustrates the flip side of MySpace Founder Chris DeMarco’s story—that it’s important not just to know your customer, but to be out ahead of them, providing leadership for the market, and using your particular skills to deliver that leading product.

The World Poker Tour is a perfect example of this concept. Ten years ago, sure, everyone (well, technically, 40 million Americans, according to Lipscomb) had a home game, playing nickel-dime-quarter five-card draw with their friends once a month. It takes real market leadership, however, to believe that you can turn those kinds of poker players into fans of a regular poker television series. Lipscomb believed that he could.

Every business comes down to the numbers in the end; Lipscomb pitches it so convincingly today, of course, saying, “If we just got as many people to watch poker as already watched bowling…” That’s the right spin to put on it, of course—not just because it sounds so achievable (because who watches bowling?), but even moreso because it sets up the World Poker Tour as not just different, but first equal and then different. A successful salesman I knew once told me that you need to make any sale in just that way—that, to replace an existing product or preconception, you need to be not only better, but also equal, so that you can be a solid substitute. With his numbers, Lipscomb showed people in the gaming and TV industries that poker could be equal to what was out there, and that it could be better.

Now, whether or not you have believers, you’ve got to have that product. Lipscomb displayed classic effectual reasoning—a bedrock concept of entrepreneurship—in developing his concept and his product. As described by Saras Sarasvathy (warning, PDF), effectual reasoning involves thinking not from a goal to the means to achieve that goal, but, instead, looking to the means at hand and discovering what might be done with them. An effectual thinker emphasizes repeated experimentation, measuring and taking manageable risks that involve manageable losses, and building partnerships that build capability and deliver customer insight. Through this process, the entrepreneur is able to both triangulate in on the right customer and respond, quickly and relatively inexpensively, to changes in the market or context. As Sarasvathy says, the watch-phrase of the effectual-thinking entrepreneur is “to the extent that we can control the future, we do not need to predict it.”

Lipscomb, it turns out, was a documentary filmmaker before he turned to Texas Hold ‘Em, and, with his filmmaking skills, he was able to recognize the stories that could be told about poker. “Take the strengths you have and make them work for you,” is how he describes his approach. Lipscomb shot bios of, and interviews with, the players, and introduced a camera that showed audiences what cards players had—earlier poker specials had one or two cameras, no character development, and no way for the audience to see hole cards. The result was a dramatically different product than the unpopular, occasional, late-night poker that was on television; it was a product that appealed to the weekend player, the armchair statistician, the somewhat-larger-than-bowling audience.

But the idea was not the whole thing; Lipscomb needed access to the poker world and to the television world as well. Thanks to his past life as a TV producer, he had connections with TV networks, but it took him time to build connections with poker players to gain the legitimacy and backing that was needed to bring casinos on board with the World Poker Tour. With these networks built, Lipscomb was able to raise cash from external sources and talk to the people who made things happen in the gambling world. Moving from capability to network-building to low-cost experimentation (the cost to film the first WPT episode was cheap compared to top prime-time programming), Lipscomb took a classic effectual path to success.

Since then, the poker world has taken off. There are now dozens of places to play poker online, a new World Poker Tour TV imitator every few months, a renewed interest in live games at casinos, and a thriving industry in books and equipment. The World Poker Tour was first, and really lit the fire under this industry, crystallizing the market so that people understood it was there and so that the consumers in the market understood that they could get the poker-related items that they wanted out there. But Lipscomb doesn’t worry about the competition—or even the fact that UK-based online gaming site PartyPoker has a market cap several times WPT’s. “When the competition comes, focus on the long-term, focus on the plan, focus on what differentiates you.”, Lipscomb says. And, he suggested, if you’re doing something you love then you won’t mind people making money off of it too.

Lipscomb hinted at a great new idea that effectually leveraged his core skillset—the traits that really differentiate him—when I talked to him after he spoke. He gave us a fun presentation, and I’m looking forward to whatever his next big thing is.

Wade is an MBA student at USC's Marshall School of Business and an occassional contributor to Babblog. His work can also be seen at
Junior Bird, and he can be reached at wade@juniorbird.com.